Draft legislation to improve outcomes for financial services customers

The Australian Federal Government is holding a second round of consultation on draft legislation for Design and Distribution Obligations and a Product Intervention Power, providing an opportunity for stakeholders to have a further say on whether the legislation delivers the desired outcomes.

NIBA is currently looking at the revised draft legislation, and will respond to the Government in the near future

“The Design and Distribution Obligations and the Product Intervention Power will ensure that financial products are targeted and sold to the right consumers, and where products are inappropriately targeted or sold, ASIC will be empowered to intervene in the distribution of the product to prevent harm to consumers,” the Minister for Revenue and Financial Services, Kelly O’Dwyer said.

“We have carefully considered feedback provided in the first round of consultation and made amendments to the draft legislation. The Government welcomes stakeholder views to ensure the legislation operates to assist consumers to obtain appropriate financial products, and allows businesses to adapt to the new regime.”

“The legislation will also strengthen ASIC’s powers to intervene in the distribution of products, reducing potential harm to consumers if a company acts inappropriately.”

The Design and Distribution Obligations will require issuers of financial products to:
• identify target markets for their products, having regard to the features of products and consumers in those markets;
• select appropriate distribution channels; and
• periodically review arrangements to ensure they continue to be appropriate.
In addition, distributors of financial products will be required to:
• put in place reasonable controls to ensure products are distributed in accordance with the identified target markets; and
• comply with reasonable requests for information from the issuer in relation to the product’s review.

“Design and Distribution Obligations and the Product Intervention Power are about ensuring a customer-centric approach to product design, marketing and distribution,” O’Dwyer said.

The measures follow announcements to boost the resources and capabilities of ASIC including announcing the
strengthening of criminal and civil penalties by increasing terms of imprisonment and fines, increasing the
maximum civil penalties can that be imposed by the courts, and allowing ASIC to seek to strip wrongdoers
of profits illegally obtained, or losses avoided from contraventions resulting in civil penalty proceedings,
and further boosting ASIC’s regulatory toolkit by improving search warrant powers and providing access to
telecommunications intercept materials.

The consultation on the draft legislation will close on 15 August 2018 and submissions can be made on the
Treasury website. The legislation is due to be introduced into the Parliament late this year.